Thursday, November 5, 2009

General Motors angered German politicians yesterday with its decision to scrap the sale of its European division. From today's Wall Street Journal:

German politicians reacted with anger and disbelief Wednesday at General Motors Co.'s decision to scrap the sale of its European division, as the failure of the nearly completed deal handed Chancellor Angela Merkel her biggest political setback since winning re-election in September.

Ms. Merkel had fought for months to arrange Opel's sale to Canadian auto supplier Magna International Inc. and its Russian partner Sberbank, and had offered billions in state financing aid in return for promises to protect German factories.

GM's decision late Tuesday to keep Opel and its sister British brand Vauxhall after all, and to pursue a restructuring that could involve heavier job losses and plant closures in Germany, blindsided Ms. Merkel, according to people familiar with the matter.

The chancellor's spokesman said GM's move was surprising and disappointing. Her economics minister Rainer Brüderle called GM's decision "completely unacceptable."

The failure of Opel sale is a personal defeat for Ms. Merkel and her top aides, who have spent "hundreds of hours" on Opel in the past year, according to a senior German official.

The announcement came at an embarrassing time. Ms. Merkel was in Washington, where she had just met with President Barack Obama and held a warmly received speech before a joint meeting of Congress. Throughout her meetings, Ms. Merkel had no indication that GM, which is majority owned by the U.S. government, was about to back out of the Opel sale.

The Obama administration denied any direct involvement in the decision:

The White House distanced itself from the GM decision, saying it had no direct involvement. "Business decisions by GM are made by the corporate leadership at GM and not by anybody at the White House," spokesman Robert Gibbs told reporters.

Once again, the Obama administration manages to insult and anger an important ally. Recall that the President announced his decision to scrap plans for an eastern Europe-based missile defense system on the 70th anniversary of the Soviet invasion of eastern Poland. There was also that thoughtful gift of 25 American movie classics DVD's (in the wrong format) to British Prime Minister Gordon Brown.